Pre Immigration Tax Planning for 2014 and Beyond

The alien person who is coming to the U.S. for a permanent physical presence; or a lengthy physical stay in the U.S. will have to make sure they do not pay unnecessary U.S. taxes.

A person who comes to the United States must protect their wealth accumulated prior to their U.S. residency from U.S. taxes.

The difference between proper tax planning for Pre Immigration could be shown by a simple example.

An example would be a nonresident individual who purchased a share of Apple stock for $200.00 and it is worth $500.00. Assume the nonresident sold the Apple stock for $300.00 gain before becoming a U.S. Taxpayer. There is no U.S. tax on the $300.00 gain.

Assume the same nonresident did not sell the stock prior to becoming a “U.S. tax resident”. If the stock was sold for $500.00 after he or she became a U.S. “tax resident”, there would be a U.S. on the “gain” of $300.00 actually earned in prior years.

U.S. Tax Residency

When does a non U.S. citizen (Alien) become a U.S. Taxpayer?

It is important for a non U.S. citizen who is physically in the U.S. to know when they might be considered to be a “U.S. taxpayer”. As a general rule, individuals who have their homes and business continuing outside of the U.S. must limit their physical presence to a maximum of 182 days in the U.S. The time frame for many is even more limited. This time frame may be extended in the event the U.S. has a Tax Treat with the Taxpayer’s home country.

Any person with a “green card” representing a permanent U.S. residency becomes a U.S. taxpayer when they first receive a “green card” and are on American soil (including Embassies).

Foreign Business Operations

There are many different strategies that need to be considered and many tax benefits that may be achieved when immigrants continue their foreign business overseas.

If they properly plan for their continued foreign income, they can earn income from these investments and businesses at reduced tax rates.

Foreign Estate and Gift Tax

It is also very important that immigrants with a worldwide wealth in excess of $5 Million understand the U.S. gift and estate taxes.

The U.S. will tax wealth that is transferred usually from one generation to the next such as by inheritance. However, these taxes will not apply unless the transfers amount to more than $5,000,000 per person.

Pre Immigration Tax Planning can be accomplished for income taxes, gains from sales on gifts and estate taxes on an inheritance. However, all of this will only work if the tax planning is completed prior to obtaining U.S. tax residency.

This presentation is over 1 hour. The immigrating Non Resident Alien must prepare for a tax life as a Resident Alien. This means taking advantage of all of the tax deductions and tax investment incentives offered by the U.S. Tax Code. It may actually mean leaving certain of the taxpayer’s foreign investments in place. This is also the subject of a separate article on the Taxation of Immigrating to the United States.